The 11% return this week takes ZE PAK's (WSE:ZEP) shareholders five-year gains to 132%

Simply Wall St · 04/15 06:19

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on a lighter note, a good company can see its share price rise well over 100%. For instance, the price of ZE PAK SA (WSE:ZEP) stock is up an impressive 132% over the last five years. Also pleasing for shareholders was the 30% gain in the last three months. But this could be related to the strong market, which is up 15% in the last three months.

Since the stock has added zł90m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the last half decade, ZE PAK became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the ZE PAK share price is up 5.1% in the last three years. Meanwhile, EPS is up 51% per year. This EPS growth is higher than the 1.7% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days. This unenthusiastic sentiment is reflected in the stock's reasonably modest P/E ratio of 2.05.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
WSE:ZEP Earnings Per Share Growth April 15th 2025

It is of course excellent to see how ZE PAK has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at ZE PAK's financial health with this free report on its balance sheet.

A Different Perspective

ZE PAK shareholders are down 6.0% for the year, but the market itself is up 11%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 18% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should learn about the 3 warning signs we've spotted with ZE PAK (including 2 which shouldn't be ignored) .

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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Polish exchanges.